Introduction to Ratemaking and Loss Reserving for Property and Casualty Insurance

This text provides a basic foundation of knowledge concerning two fundamental building blocks of property/casualty actuarial work: ratemaking and loss reserving. Although the material is of property/casualty origins, the methods presented have potential application in other insurance areas including health insurance and risk management. The text contains a number of worked examples and end-of-chapter exercises. The fourth edition reverses the order of chapters three and four from previous editions. The estimation of the ultimate claim payments is a necessary first step in both the loss reserving process and ratemaking process. Determining the ultimate losses is more comprehensively covered in the loss reserving chapter, and the ratemaking process often relies on the estimates of ultimate losses determined in the loss reserving process. As a result, the loss reserving chapter now comes before the ratemaking chapter. The frequency and severity section of the loss reserving chapter has been revised to demonstrate the closure method of estimating ultimate losses. The chapter on intermediate topics has been updated to include deductible pricing, as this alternative approach to the ratemaking in chapter four is typically used for pricing various deductible options. Finally, the fourth edition has been updated to reflect industry changes and includes even more exercises than previous editions.